TIDMGTC
RNS Number : 0815U
GETECH Group plc
27 March 2019
Getech Group plc
("Getech" or the "Company" and with its subsidiaries the "Getech
Group")
Pre-Close Update: 12 months to 31 December 2018
27 March 2019
Getech (AIM; GTC) provides geoscience and geospatial products
and services to companies and governments who use them to de-risk
exploration programmes and improve their management of natural
resources. The Group's activities focus on a suite of data,
software and information products; the value of which is enhanced
through services that leverage these products and the Company's
geoscience-geospatial skills.
Getech's product-led strategy targets recurring revenue growth.
Its programme of investment is shaped by a culture of customer
collaboration and a commitment to continuous product and service
enhancement. In 2018, against rising and then falling crude prices,
this strategy helped keep the Group's sales campaigns aligned with
its customers' most pressing commercial needs.
This update covers the 12-month accounting period ended 31
December 2018. All figures referred to in this statement are
unaudited. The audited accounts for this period will be published
on or around 30 April 2019. Having moved its financial year-end
from 31 July to 31 December, Getech's prior audited accounts are
for the 17-month period to 31 December 2017. To aid year-on-year
comparison, this update includes unaudited financial comparators
for the 12 months ended 31 December 2017 (referred to as FY 2017).
Full details of FY 2017 will be published alongside the audited
2018 accounts.
Revenue and forward sales
Brent averaged $71/bbl in 2018, 42% higher than its prior
three-year average . With long-dated Brent consistently in excess
of $60/bbl and industry reserve replacement falling, Getech's sales
conversations for most of the year had a more forward-looking tone.
In H1 2018, with the Company's customers looking to maximise their
investment in people and technology, Getech extended its pipeline
of multi-year subscriptions to its information products and
software. This expanded Getech's foundation of recurring
revenue.
The fragility however of global growth was highlighted by a Q4
crude price fall, Brent tumbling from a high of $86/bbl to a low of
$50/bbl . It is the Directors' opinion that this fall lengthened
and complicated the sales cycle but by repositioning customer
conversations, the Company ended 2018 with a significant sale of
data and products. This sale also added a new customer to the Globe
user community.
Annual Group revenue is expected to increase to GBP8.0 million,
an 11% rise (FY 2017: GBP7.2 million). Product sales remained the
key engine for growth, expanding year-on-year by 24% (FY 2017: 19%
growth) and forming c80% of total sales (FY 2017: 72% of total
sales). As noted above, many of these new product sales had a
multi-year component, the forward value of which totalled an
additional GBP1.0 million. In Services, despite growth in Gravity
& Magnetics and Geospatial Solutions, the Geoscience Service
market remained challenging. Restructuring steps were taken in H2
2018 (discussed below).
Operational activity
Having lowered the Company's underlying like-for-like cost base
by 32% between 2016 and 2017, in 2018 management continued to
optimise the business for profitable growth.
Getech strengthened its operations by investing in its people,
products and services. The Group added new skillsets to its
offering, and new datasets were made available to customers.
Globe's expanded content and functionality attracted new users and
work was completed on time and to cost.
Updates were delivered to Getech's Global Depth to Basement
product and the Company launched Tectonics Online, a new
cloud-based platform through which customers can access Getech's
plate-modelling expertise. Getech's Data Assistant and Exploration
Analyst software were both upgraded to ArcGIS Pro, and an
Unconventionals Analyst upgrade is scheduled for the spring.
In Services, utilisation grew for the Company's Gravity &
Magnetic team and the Geospatial team won a new support contract
with a supermajor and expanded its work in the energy
infrastructure space to include sub-sea power cabling and
terrestrial pipeline projects. Both teams delivered revenue and
profit growth but at the divisional level this was offset by a fall
in Geoscience Service revenue.
To address the losses in Geoscience Services, in H2 2018 Getech
restructured this team, and in October the Company merged its
London and Henley offices. The total cost of this restructuring was
GBP0.2 million, and it is expected to deliver a forward annualised
fixed cost saving of cGBP0.5 million per year.
The Geoscience Service team is now more flexible and fully
aligned with Getech's activities. Its tendering process has been
strengthened and the team are awaiting award decisions on several
potentially significant new projects.
Capital investment and cost base *
Before restructuring costs, Getech's 2018 total cost base is
expected to be GBP7.6 million (FY 2017 GBP7.2 million). Product
investment expanded to approximately GBP0.9 million (FY 2017:
GBP0.8 million). Fixed costs fell by GBP0.1m to GBP6.3 million,
whilst variable costs increased by GBP0.5 million; a key driver of
which was a greater weighting of data sales in the H2 2018 sales
mix.
Cash from operations and EBITDA
Cash from operations, before changes in working capital and
restructuring costs, is expected to total GBP1.2 million (FY 2017:
GBP0.6 million). In addition, cash R&D tax credits totalled
GBP0.5 million (FY 2017: GBP0.4 million).
Adjusted for restructuring costs, EBITDA for the year is
expected to total GBP1.2 million (FY 2017: GBP0.9 million, FY 2017
adjusted for both restructuring costs and inventory
impairments).
Balance sheet
During the year Getech refinanced its debt; a long-term loan
that was reaching maturity and secured against the Group's Leeds
office. This involved repaying an outstanding sum of GBP0.63
million and drawing down a new loan facility of GBP0.95
million.
Cash at 31 December 2018 totalled GBP1.4 million (31 December
2017: GBP2.4 million). A fall in cash balances toward the year-end
was due to the timing of sales and at 31 December 2018 Getech held
a material net receivables balance (current receivables, less
current payables) totalling GBP2.0 million (31 December 2017:
GBP0.2 million).
At year-end, net cash plus net receivables totalled GBP2.5
million (31 December 2017: GBP2.0 million). Excluding long-term
debt, the total rose to GBP3.3 million (31 December 2017: GBP2.4
million).
Kitson House update
In the year Getech placed its Leeds office, Kitson House, on the
market for sale. There have been numerous viewings but in the
run-up to Brexit, UK property investment activity has slowed. The
capital invested in Kitson House can work harder for shareholders
but Getech is also not a forced seller of this asset.
2019 activity
Crude prices have strengthened and stabilised year-to-date and
the breadth of Q1 new sales activity has been greater than in
recent years. Balancing this, the lengthening of the sales cycle
that emerged in Q4 2018 has persisted into 2019; the Directors
believe that customers are cautious over the early release of their
exploration and new business budgets. The Company's 2019 sales
campaigns and programme of investment are positioned to unlock
these conversations - their focus being on the commercial and
operational priorities of Getech's customers.
Jonathan Copus, Getech CEO, commented:
"Despite year-on-year improvements in crude prices 2018 customer
budgets remained constrained and commercial conditions were
volatile. We managed these issues by working closely with our
customers and focusing on their most pressing commercial needs.
This enabled us to maintain flexibility in our sales conversations,
which translated to new customers, growth in revenue and profit,
and an extension to our baseline of forward sales. Underpinning
this performance is our central ethos - to continuously enhance the
practical operational value of our products and services."
* Cost base is measured as: cost of sales, administrative costs
and development costs capitalised, less depreciation and
amortisation, and adjustments for movements in inventories, foreign
exchange and non-cash provisions. These are Getech's cash operating
costs.
Source: Bloomberg, Brent Crude Oil Prices (CO1:COM)
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Getech Group plc Tel: 0113 322 2200
Jonathan Copus, Chief Executive
WH Ireland Limited Tel: 0161 832 2174
Katy Mitchell
Notes to Editors:
The Getech Group provides the expertise, support and knowledge
that companies and governments need to better discover, develop and
manage natural resources. Our data-rich products, GIS solutions and
government advisory services help our customers to achieve their
business goals of cost control, operational excellence, regulatory
compliance and environmental responsibility.
For more information, please visit our website at
www.getech.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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